Investors looking to add a large-cap fund to their portfolio can buy units of ICICI Focused Bluechip Equity. The fund’s portfolio is made up mostly of the Nifty index stocks, making it a safe bet for investors with a low risk appetite.

The average market capitalisation of the portfolio is around Rs 91,000 crore.

A leaning towards the stocks of Infosys, ONGC, Wipro and BHEL, all of which have been poor performers, has limited gains for ICICI Focused Bluechip Equity.

The fund’s portfolio is made up mostly of the Nifty index stocks, and it has just about kept pace with the Nifty’s 27 per cent gain in the past one year.

However, the fund has gradually been pruning these underperformers. This, together with other picks which have done well, leaves it in a better position now. Its one-year performance is below peers such as HDFC Top 200 but much better than IDFC Imperial Equity and Franklin India Bluechip.

Performance: In a three-month and six-month time-frame, the fund has surpassed its benchmark, suggesting that the fund’s declining exposure to underperforming stocks has worked. Over a three-year period, the fund has beaten its Nifty benchmark by a healthy 5 percentage points, clocking an annual return of 12 per cent. It ranks at the top in its category for this period.

The fund has also posted consistent returns, beating the Nifty nine times out of ten on a three-year rolling return basis.

Portfolio: Relying on the Nifty for most picks, the fund limits its portfolio to 20-30 stocks. It has juggled sectors well depending on prospects.

For instance, the past year has seen it piling up on banking stocks, with the sector accounting for 27 per cent of the portfolio now against the 16 per cent in November last year. It added out-performers such as Yes Bank and Kotak Mahindra Bank.

As corporate capital investments waned, the fund reduced exposure to capital goods stocks over the past two years, exiting BHEL.

Similarly, with infrastructure doing poorly in 2010 and 2011, it dropped Larsen & Toubro before slowly adding it back in 2012, the company having managed the slowdown far better than peers.

With policy reforms hanging over oil and petroleum stocks, the fund had a high exposure to the sectors over the past three years, though it has begun to prune oil exposure of late with the reform drive now spent. Similarly, policy-driven telecom is now beginning to gather interest and the fund is slowly increasing stake in Bharti Airtel.

While it reduced holdings in Infosys, the fund picked up on better prospects in the relatively smaller HCL Technologies and Tech Mahindra.

The fund has used Nifty index futures and individual stock derivatives from time to time to manage volatility, though this practice too has tapered off in the past few months.

Index futures have been around 6 per cent of the portfolio in the past couple of years while stock derivatives are less than 2 per cent.

(This article was published on December 22, 2012)
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